The formulas
- Required annual payment = lesser of 100% of current-year tax and 100% of prior-year tax (prior-year option unavailable to large corporations)
- Each installment = 25% of the required annual payment, due the 15th day of months 4, 6, 9 and 12
- Large corporation: the first installment may use the prior-year figure, and the reduction is added to the second installment
- Shortfall at each date = max(0, cumulative required - cumulative paid)
How it works
Section 6655 requires a corporation to pay estimated tax in four equal installments of 25 percent of the required annual payment. The annual payment is the lesser of 100 percent of the current-year tax and 100 percent of the prior-year tax. A large corporation, one with taxable income of $1,000,000 or more in any of the three preceding years, cannot use the prior-year figure except to lower the first installment, and that reduction is recaptured in the next.
Payments apply to the earliest unpaid installment first, so the shortfall at each date is cumulative. The addition to tax is computed at the underpayment rate under section 6621 for the days of the underpayment, which this tool does not calculate. Annualized income and adjusted seasonal installments can reduce the required amounts and are not modeled. The due dates assume a calendar year.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is the exception for small tax?
No addition applies if the tax shown on the return is under $500.
Can installments be lower?
Section 6655(e) lets an annualized income or adjusted seasonal installment reduce the required amount. This tool does not model it.
Is it 90 or 100 percent?
Section 6655(d) uses 100 percent of the tax shown on the return for a corporation.
Sources
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.